There is an interesting article in the Irish Times today:
Rich paying for downturn but 'it doesn't feel like that'
http://www.irishtimes.com/newspaper/ireland/2010/0520/1224270712006.html
I was surprised to find the following comment:
"Galway and Waterford had been at a similar level of development to each other in the 1960s, he noted, but since then Galway has thrived while Waterford has been less successful. It was worth asking whether this was because Galway was home to two world-class theatre companies."
Personally, I think it's down to the following factors, in this order,
1) NUIG has more students studying more varied subject areas than WIT, which gives Galway a cultural and commercial advantage.
2) Subsidies for the west, and government responsiveness to the needs of the west vis a vis the south east and Waterford.
3) The weak urban structure of the west makes Galway (with the possible exception to Sligo) the only urban centre that feels like a 'city'. And basically the fact that in many areas, Galway has no competition, whereas competition is fierce in the south east for all manner of investment and services, and the politcal scene is a lot more factious.
4) The underappreciation of Waterfordians of what the city has to offer versus the 'county pride' you seem to get in places like Galway.
It is worth pointing out, that Galway only overtook Waterford in population in the early 80's, but has grown very strongly ever since.